Tesla May Increase Earnings With Virtual Power Plants

Apr. 25, 2020 2:00 AM ETTesla, Inc. (TSLA)258 Comments
Ross Tessien profile picture
Ross Tessien
2.06K Followers

Summary

  • Million-mile batteries will enable construction of Virtual Power Plants.
  • Analysts' ratings and price targets for Tesla are trending upward.
  • The global pandemic has cleansed the air worldwide, creating a persistent subliminal impetus to shift to BEVs.
  • Tesla may reveal Virtual Power Plants and a new, large, near-term income stream for Tesla Energy.

Million-Mile Batteries Enable Virtual Power Plants

If I assume the entire auto industry is headed toward becoming ~100% electric powered by 2030 as I proposed in November 2018, then by 2025 new electric vehicle sales could reach 30.8 million. I used a 50% annual growth rate to estimate future production. Over the previous six years, the growth had ranged between 46% and 69%, making a 50% growth rate reasonable.

However, new factory construction is very lumpy, taking one or two years to build and bring a new EV factory up to speed. 2019 plug-in EV production was only up 9% over 2018. Last year the Tesla Shanghai Model 3 factory and the Fremont Model Y production line were both under construction. So new model arrivals were delayed until 2020. Legacy auto companies were also delayed in releasing competitive models. It seems like the industry fell one year behind my growth projections.

  • This means plug in EV production should reach approximately 20 million vehicles by 2025, my previous estimate for 2024.

GM (GM) recently held an "EV Day" where the company revealed its plans to convert its internal combustion engine, ICE, vehicles into electric vehicles. GM projects that by 2025, it will be building about 1 million EVs per year. This would be 5% of global production if realized.

Tesla in contrast has guided for 500,000 vehicles in 2020. I expect this guidance will be reaffirmed at the upcoming shareholder meeting April 29th, next week. Going forward with the industry average growth rate, Tesla will be building 3.8 million BEVs in 2025.

The point is GM's aspirations for 2025 are 25% as large as Tesla's. GM has plans to build 16 new plug in models. Tesla, in contrast, will build the majority of the volume using just five models for which the production factories are already

This article was written by

Ross Tessien profile picture
2.06K Followers
Mechanical Engineer with experience in a wide range of technologies from time domain reflectometry to CNC machining to Taylor Sedov point explosion calculations for sonoluminescence implosions using high intensity ultrasonics. Current focus is on Zero Emissions Vehicles, BEVs, and future tunnel transportation systems with an emphasis on how ground transportation systems, [e.g. The Boring Company] will evolve over the coming decade. I invest in and write about electric vehicle transportation systems and have filed several patents on tunnel transportation systems and vehicles for same. I expect these systems will augment and / or replace, current surface freeways in the near future.

Disclosure: I am/we are long TSLA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I expect many or most legacy auto companies will fail to navigate the collapsing market for gas vehicles. Tesla EVs are no more "cars" than the Apple iPhone is a "flip phone". They have different capabilities than the old technology. For Tesla, much of the new technology is still under development. But it includes electric utility power grid energy storage, something no other auto company is even considering getting into. Tesla is already refining the software to do it in South Australia and simply needs to introduce the million mile battery into cars, and then enable the chargers to perform the functions of inverters and voila, a completely new market space for Tesla to fill that no other EV can.

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